It’s encouraging that the regime contains provision for the inclusion of petroleum products but it’s harrowing that the Government is reaping benefits without full implementation Replying to a debate in Parliament on July 20, 2018, during the no-confidence motion against his Government, Prime Minister Narendra Modi gave a comprehensive account of the various schemes, reform measures and achievements during the last four years of his stint. A prominent reform measure listed by Modi was the Goods and Services Tax (GST) launched on July 1, 2017. Dwelling on the contentious issue of five hydrocarbon products: Natural gas, crude oil, petrol, diesel and aviation turbine fuel, he opined that under the UPA, these products were excluded under their version of the Constitution (Amendment) Bill,...
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POLL SOPS DERAIL FISCAL CONSOLIDATION
The Government must shun the practice of giving sops through loan-waivers or the country will plunge into a fiscal disaster, inviting miseries for the poor In elections-after-elections, it has become normal for political parties to promise farm loan-waiver in order to swing votes to their favour. Last year, in Uttar Pradesh, loan waiver to small and marginal farmers promised by the Bharatiya Janata Party (BJP) Government was a major factor in catapulting it to power in the State. It cost the State exchequer around Rs 36,000 crore. In Punjab, the Congress won the election on the promise of waiving all outstanding loans to the farmers. Recently, in Karnataka, the coalition Government led by the Janata Dal (Secular) leader, HD Kumaraswamy,...
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THE MYTH AROUND JOBLESSNESS
Contrary to popular belief, the Modi Government has not failed to deliver on job creation. It’s just that we need to get reconciled to the idea of self-employment Prime Minister Modi (allegedly) failed on his pledge to create around 20 million jobs annually. To demonstrate the point, critics have often point to hundreds and thousands of youth submitting applications for a few vacancies of peon/clerk in Government offices. They cite this yawning gap as an indicator of joblessness in the country. The underlying assumption behind this inference is that all those youths who applied for the available vacancies do not have any work at hand or any source of income. Such an assumption is fallacious. Had it been so — millions of...
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RBI has put growth on backburner, yet again
The decision of the Reserve Bank of India (RBI) last month to increase the repo rate or the policy rate (the rate at which the RBI lends money to commercial banks) from 6% to 6.25% has led to widespread disappointment, especially in industry and trade circles. In 2016, the union government had put in place an institutionalised framework, the Monetary Policy Committee (MPC), to formulate monetary policy and determine the key interest rates. The committee consists of six members drawn from different fields, including the RBI governor, who is also the MPC’s chairperson. With this, the process was expected to become more informed and objective — free from the idiosyncrasies of the governor, who had the sole authority under the...
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Fuel price reduction: the ball is in the states’ court
The steep increase in the prices of petrol and diesel, by over Rs 3.5 per litre each, after the assembly elections in Karnataka has yet again built up pressure on the Narendra Modi government to reduce excise duty on fuel. Between November 2014 and January 2016, excise duty on petrol went up from Rs 9.48 per litre to Rs 21.48 per litre; on diesel, the increase was even sharper, from Rs 3.56 per litre to Rs 17.33 a litre. That coincided with a steep decline in the international price of crude oil from $117 per barrel in November 2014 to a low of $27 per barrel in January 2016. Thereafter, crude price moved up gradually to $40 per barrel by...
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ACHIEVING SELF-RELIANCE IN OIL AND GAS
For fresh exploration efforts — in both conventional and unconventional hydrocarbons — the emerging policy and regulatory environment is conducive. However, Team Modi needs to walk an extra mile to reduce regulatory hurdles for existing operators under production sharing contracts A hike in the price of crude oil (courtesy, the US’s decision to reimpose sanctions against Iran and output decline in Venezuela) has drawn the attention to India’s dependence on oil import, which currently stands at 83 per cent, to meet its energy requirement. This, due to a lack of a conducive policy and regulatory environment that came in the way of boosting domestic exploration and production efforts so far. Until the late 1990s, exploration and production of oil and gas used...
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Walmart’s backdoor entry into Indian retail
Walmart, the $500 billion retail giant, has acquired 77% stake in Flipkart, a leading Indian brand in e-commerce segment, with an investment of $16 billion. The balance 23% will be with minority investors, including Alphabet (a subsidiary of global internet giant Google) which will invest $1.5 billion. Walmart is not new to the Indian market. It came to India initially in 2007 in the “wholesale cash and carry” business viz sale to wholesalers and other bulk buyers (including institutional agencies) under a joint venture (JV) arrangement with Bharti Retail. This was under the then FDI (foreign direct investment) policy which allowed foreign investor 51% stake in this business. In 2012, the then UPA-II government liberalised the policy to allow 100%...
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HAS GOVERNMENT RUN OUT OF OPTIONS?
GST Council — the all powerful body that considers changes in the tax structure/rate — should consider inclusion of oil and gas products in the GST, putting them under the 18 per cent slab with the aim of eventually shifting them to the 12 per cent slab Some time back, three public sector undertakings (PSU) in the downstream oil segment viz Indian Oil Corporation (IOCL), Hindustan Petroleum Corporation Limited (HPCL) and Bharat Petroleum Corporation Limited (BPCL) were reportedly directed not to hike the price of petrol and diesel by one rupee a litre each that had become necessary due to an increase in the international price of these products. The prices of these products were decontrolled (petrol in June 2010...
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Farm price, market assurance will bloat fiscal deficit
Stung by depressed price-realisation by farmers, much below the minimum support price (MSP), and with impending general elections next year, the Narendra Modi government announced in the Union Budget for 2018-19 that henceforth, they will be assured MSP which is at least 1.5 times the cost of production. Mere assurance of a remunerative price is of no use unless the farmer is able to sell his entire produce at this price. Keen to ensure that this happens, the government asked NITI Aayog to come up with suggestions. The latter prescribed three alternatives, namely: market assurance scheme (MAS) or price deficiency payments or incentives to private sector to buy farmers’ produce at MSP. Under MAS, agencies of the state buy the...
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FLEDGLING FERTILISER REFORMS
Successive Governments have lamented an increase in fertiliser subsidy and its destabilising effect on the fiscal situation. Yet, they have failed to address the real issue The price of domestic gas has been increased from the existing $ 2.89 per million British thermal unit (mmBtu) on net calorific value basis to $3.06 per mmBtu for a six-month period beginning April 1. The hike, taking the price back to the level reached two years ago, has brought to the fore some niggling questions which successive ruling dispensations have dodged for several decades. First, who pays for the extra price that user industries — mainly fertilisers (besides power, CNG and PNG) — shell out? The urea industry alone requires over 45 million standard cubic...
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